Correlation Between GM and Pacer

Can any of the company-specific risk be diversified away by investing in both GM and Pacer at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Pacer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Pacer, you can compare the effects of market volatilities on GM and Pacer and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Pacer. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Pacer.

Diversification Opportunities for GM and Pacer

0.0

Correlation Coefficient

GM  Pacer

Pay attention - limited upside

The 3 months correlation between GM and Pacer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Pacer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Pacer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer has no effect on the direction of GM i.e., GM and Pacer go up and down completely randomly.

Pair Corralation between GM and Pacer

If you would invest (100.00) in Pacer on September 19, 2024 and sell it today you would earn a total of  100.00  from holding Pacer or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

General Motors  vs.  Pacer

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pacer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Pacer is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Pacer

The main advantage of trading using opposite GM and Pacer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Pacer can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pacer will offset losses from the drop in Pacer's long position.

The idea behind General Motors and Pacer pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.